During the week of September 09-13, 2013 structured note issuance has been 1.283 BN across various issuers and asset classes. Most of the issuance (1 BN) is driven by Interest Rate linked notes and 280 MM of the issuance is driven by Equity linked products. For Details of the distribution refer to the chart below. Surprisingly majority of the structured note issuance is linked to Interest Rate linked.
Interactive Issuance analysis
You can click individual asset classes to see how the underlying issuance has happened within each asset type by underlying and Issuer.
Underlying analysis
KDB has issued one large interest rate linked fixed rate notes. This note matures in March 2019. 750 MM Fixed rates paying a coupon of 3 % and suitable for investors seeking to tap into the rising interest rates. This might not be a best deal for an aggressive investor but definitely better yields when compared to US 5Y Treasury
On the Equity linked notes front there has been good amount of activity. JPM leading the pack with 25.5 % market share.
Notably JPM issued a large note on Russell index to the investors. These notes belong to class of leveraged notes. They command twice the market performance with cap. On the downside this note will participate in 1 to 1 downside. There is a possibility of losing entire principal. But If investors portfolios have captured market performance and think market performance would not be in single digits they can juice twice the returns with some protection. Definitely a good deal to think of!. There are other notes that were designed with S&P 500 and EURO STOXX 50 index. There are some interesting notes that are providing good return on the investment. Refer to the chart below for issuance of other underlyings.
There has been some issuance activity in Commodity and Currency segments of the markets. Currency asset class issuance have been tied to USDMXN currency. This note provide investors good returns as long as currencies settles does not depreciate more than 20%.
With in the Commodity space, Gold and OIL linked notes were made available to investors. Giving investors an opportunity to obtain accelerated returns on the underlying changes.
Size of the note types will tell us an indication of what type structures are popular among the investors and where money is flowing. Below chart shows this theme
Popular notes have been Fixed Rate Notes, Floating rate notes. Two notes are Interest rate related notes designed to capture the performance in the Fixed income markets.This kind of activity could be due to surge in demand from investors to capture market gains as they view markets will witness rising yield environment. This week market activity has been shadowed by one large issuance by Korean Development Bank.
Now moving on to issuers side and understanding their market penetration or competitor analysis provides some interesting insights.
This week KDB with its large issuances of Interest Rate linked notes captured 60% of the issuance volume. JPM, RBC and GS captured market share around 5%.
Market penetration is driven by the issuer depth in each of the asset classes. Every issuer has presence in Equity linked issuance. Goldman is only issuer to produce Currency related issuance. Morgan Stanley and JPM are active players in the Hybrid related issuance.
Maturity profile of the issuance by issuer provides where volumes are anchored. Interestingly most of the volume issued this week matures between 2014 and 2016. This can be attributed to two facts. Issuers are stretching the maturity of the note to come up with better coupons.
For additional details please refer to the Issuance summary table.
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